It’s safe to say that executives with Restaurant Brands International are fans of Spongebob Squarepants—not to mention franchisees of the company’s Burger King brand.
The fast-food chain’s same-store sales rose 2.6% in the fourth quarter in the U.S., the third straight positive quarter and the ninth time in the past 12 months that the brand has outperformed the broader quick-service restaurant industry.
Much of that had to do with the Spongebob menu, which featured a selection of items like a Krabby Whopper with a yellow bun and a Strawberry Shortcake Pie that proved remarkably popular.
“It was really creative,” Josh Kobza, RBI CEO, said in an interview. He credited Joel Yashinsky, the brand’s chief marketing officer, for the effort. “The culinary side, the naming was great. I also think they did a great job on the packaging. It was both neat and creative and, I think, well-executed.”
It also did something else, however. It brought families back to the chain’s restaurants, and they apparently kept coming back.
Kids meals reached their highest incidence in 10 years, Kobza told analysts. And he said that customers kept coming into the chain’s restaurants in January.
“We can watch and see, for the folks who came in December, who came back in January, and that’s showing us very encouraging progress versus what we saw in some of the prior partnerships we’ve done,” Kobza said.
That is crucial for the chain, which has been in turnaround mode for years, fueled by billions of dollars in investment from RBI. Burger King has been pushing operations improvements under the brand’s president, Tom Curtis. And executives believe those improvements are making the restaurants more inviting for customers that visited the chain to try the Spongebob meal.
In effect, the restaurants were ready for the customers. “People are coming to better-looking restaurants and having a better experience,” RBI Executive Chairman Patrick Doyle said.
To be sure, not all was great for Burger King in the quarter. Beef prices soared 20% last year, which drove a commodity cost increase of 7%. That hurt franchisee profitability, which declined 10% last year. Burger King operator profits would have been flat without that beef cost inflation, which executives believe is cyclical. Company executives expect relief at some point, but in the back half of this year at best.
Still, Burger King’s comeback has bucked some of the chain’s past strategies, notably its frequent reliance on deep discounts to generate traffic. Those discounts frequently hurt operator profitability and were likely a contributor to the rash of franchisee bankruptcies in 2023.
That’s notable given the environment, in which lower-income consumers are cutting back on frequency and many of the brand’s competitors are pushing discounts. Burger King rival McDonald’s lowered prices on bundled meals last year—to some success—while Wendy’s in January introduced a new value offer of its own.
Burger King did have some values, notably $5 Duos and $7 Trios, which allow customers to pick from a selection of items for those prices. But, Doyle said, “We didn’t need to rely on deep discounting to drive top-line results. The core business continued to improve.”
The company has big plans this year. It recently added former head chef at Popeyes, Amy Alarcon, to take that position with Burger King. She will lead a strategy this year to elevate Burger King’s food, which will be part of a broad effort to elevate the brand.
Executives believe that Burger King is ready for that kind of effort.
“Some of the work that has been happening over the last four years … gives us permission now to go and do some cool things on the culinary side, to really elevate a bunch of our core products, starting with the Whopper,” Kobza said.
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